Will France's supertax spark 'patriotism' or a brain drain?

Billionaire businessman Bernard Arnault may be under fire over alleged plans to flee France's 75% tax band in Belgium, but he is unlikely to be the last

Bernard Arnault, chief executive of Louis Vuitton Moët Hennessy. The French press speculates that his ultimate destination is Monaco, where Belgian citizens can live tax-free. Photograph: Michel Euler/AP

The news that the billionaire businessman might head to the land of moules-frites generated headlines, insults, a lawsuit and divided France roughly down right-left lines: those who saw Arnault as a symbol of the "selfish rich" and those who saw him as a standard bearer for the tax-bludgeoned entrepreneur trying to create jobs and wealth.

Arnault, 63, a friend of former rightwing president Nicolas Sarkozy (he was a witness at Sarkozy's second marriage), denied he was planning to up sticks to get out of paying a new 75% "supertax" on the rich, one of the vote-winning pillars of Socialist François Hollande's election campaign in May.

The explanation from an LVMH spokesman was that Arnault was seeking dual citizenship to make "sensitive" investments in Belgium, a response shot down by the Belgian authorities who said foreign investors enjoy the same fiscal treatment as locals.

Living in Belgium, which Arnault – net worth an estimated at $24.4bn (£15bn), according to the Bloomberg Billionaires Index – said he had no intention of doing, would conveniently free him of French taxes on income, inheritance and wealth.

However, the mayor of Uccle, a chic suburb of Brussels where Arnault has a property, said the billionaire had voiced his unhappiness with the French tax system even before the presidential election.

"Mr Arnault came to see me at the end of last year, wanting to be domiciled here, to live here," Mayor Armand de Decker told the newspaper La Libre Belgique. "He has a feeling about the policies of his country, which he considers unfriendly to business."

Was Arnault paving the way to Monte Carlo, the French press wondered. The route to Monaco via Belgium is a well-trodden one: once he had dual nationality, the businessman could theoretically renounce his French citizenship and move to the Riviera principality where Belgian nationals – but not French citizens – can live tax-free.

Shortly before the Arnault scandal erupted, the businessman had met the French prime minister, Jean-Marc Ayrault, to tell him exactly what he thought of the new tax band. A week ago, Hollande went on television to reiterate: the 75% tax band for those earning over €1m (£810,000) was on its way.

"There will be no exceptions," he said. "Everyone has to make an effort, play their part. We all have to be patriots. especially them [those earning over €1ma year]."

A 75% tax band will give France the highest tax rate in Europe – overtaking Sweden – and possibly the world (tax burdens are complicated to calculate).

Hollande has also warned that households will have to come up with an extra €10bn to help bring down the country's public deficit.

The president, who once admitted: "I don't like the rich", certainly has France's wealthiest citizens in his sights, but the French middle class is likely to be pummelled too.

As well as the new 75% tax, a 45% band is to be introduced on incomes over €150,000 a year (up from 41%) and households will be limited to a maximum €10,000 savings on tax reduction schemes (down from €18,000).

France is also looking to beef up its "wealth tax", imposed on households with assets worth more than €1.3m including their main home. The threshold for inheritance tax has already been lowered from €150,000 to €100,000, a move expected to raise around €2.5bn by 2014, and there are moves afoot to raise the rate of capital gains tax.

Even low earners will pay more income tax after the household allowance (the same as the personal allowance, only applied to families not individuals) is reduced from €2,336 to €2,000 a year.

Hollande is also said to be considering a fiscal law, similar to that in the US, under which French taxpayers would be subject to French taxes even if they leave the country.

For Socialists, the 75% supertax is considered the vote-winner in May's presidential and legislative elections. Even though a small number of French people, probably fewer than 30,000 in a country of 64 million, will be affected, it is hugely symbolic for the leftwing president and his administration.

However, Jean-Philippe Delsol, a tax lawyer and member of the IREF economic thinktank which supports "economic freedom", says the tax is populist and plays on a historic Gallic antipathy to the rich.

"If you are wealthy in the UK, there is no hate. There may be envy and scorn, but there is no hate, real hate like there is in France. We like everyone to be the same and if they are different we detest them," Delsol said.

"Maybe it's because we are a Catholic country and have a lot of rural people who don't like the rich, or because of the idea of egalitarianism that came out of the French revolution, or from Marxism that gained a hold in France."

Critics like Delsol say the tax will halt the "economic flux" necessary for growth and will have the opposite effect to that needed.

France, like the UK, already has its tax exiles, including the former Victoria's Secret model Laetitia Casta, the multi-starred restaurateur Alain Ducasse and singer Johnny Hallyday, who like Arnault, caused a storm by seeking Belgian nationality. Hallyday, whose real name is Smet, was turned down by Brussels even though his father was Belgian, and instead moved to Switzerland.

Delsol believes many more could follow. "Even Henry IV's minister Barthélémy de Laffemas in the 16th century understood that high taxes kill the total revenues. And there is an enormous risk people will leave the country."

Delsol said that last year his law firm had dealt with five cases of French people seeking to go abroad for tax reasons. The threat of a 75% supertax tripled that number.

"In just the first four months of this year we had 15 clients who are leaving or want to leave France. And it's a different type of person. Before we'd have businessmen selling up to go into retirement and wanting to go to Belgium or Switzerland, where they don't have to pay capital gains tax.

"Today it's younger people, 40- to 48-year-olds, new entrepreneurs with lots of energy who have already made money and want to make more, which they don't want to have taken by the French tax authorities.

"They are going to Brazil, Luxembourg … anywhere but France, and that is bad news for this country.

"It's not just about tax either, it's the climate. People who are making money in France are fed up with being despised."

The office of Pierre Moscovici, the French finance minister, did not respond to a Guardian request for information about how much income the new 75% supertax would generate. But Hollande and his administration, it seems, are prepared to risk an entrepreneurial brain drain.

Asked about Arnault during a television interview, the president replied: "He should have taken into account what it means to be French. We are a big country, with lots of advantages and history. We are proud to be French. We have to call on patriotism at this time … to ask for an effort in the battle against debt."

As the American economist and politician Charles Wheelan claimed in his book Naked Economics: "France is a good place to be a struggling artist, and a bad place to be an internet entrepreneur".